IMF Warns Trump's Iran War Could Unleash Global Recession

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A Harvard expert who specializes in looking beyond official government estimates to calculate the true financial cost of US wars has said she is“certain” the price tag of Trump's assault on Iran will eventually reach at least $1 trillion, once benefits for troops, replenishment of munition stockpiles, borrowing costs, and other factors are fully taken into account.

“We are borrowing to finance this war at higher rates, on top of a much larger debt base,” Linda Bilmes, the Daniel Patrick Moynihan senior lecturer in public policy at the Harvard Kennedy School, said in a recent interview.“The result is that the interest costs alone will add billions of dollars to the total cost of this war. And unlike the upfront costs, these are costs we are explicitly passing on to the next generation.”

Bilmes, who co-authored The Three Trillion Dollar War: The True Cost of the Iraq Conflict with Nobel laureate economist Joseph Stiglitz, estimates that the first several days of the US-Israeli assault on Iran cost American taxpayers at least $16 billion – significantly more than the Pentagon's official figure, $11.3 billion.

“The short-term costs are even higher than they appear,” Bilmes emphasized.“The Pentagon reports costs based on the historical value of inventory, instead of the actual cost it takes to replace what we are using. And those replacement costs are far higher.”

Bilmes also pointed to the substantial costs of“large, multi-year contracts” that the Trump administration has inked with arms manufacturers such as Lockheed Martin.

Over the long-term, said Bilmes, the cost of veterans ' care will be massive.“We now have roughly 55,000 US troops deployed in this conflict who have been exposed to toxins, contaminants, and environmental hazards, such as burning fuel and chemical residues that we know can cause long-term harm,” she noted.“If even one-third of the 55,000 troops deployed today claim benefits, then we are committing ourselves to tens or hundreds of billions of dollars in disability and medical care costs for this cohort alone.”

“I am certain we will spend $1 trillion for the Iran war,” Bilmes said.“Perhaps we have already racked up that amount.”

The Trump administration is expected to request that Congress approve between $80 billion and $100 billion in funding for the Iran war, according to The Washington Post. Earlier this month, the Trump White House released a budget proposal that called for $1.5 trillion in military spending next fiscal year.

Bilmes noted that if Trump's request is fully enacted, US military spending will rise“to levels about 20% higher than the peak reached during World War Two.”

“This raises the baseline,” Bilmes said.“Even if Congress does not agree to approve the full increase, it is highly likely that at least $100 billion per year will be added to the base defense budget that would not have been approved in the absence of this war.”

“And once that increase is built into the base,” she added,“it raises the baseline and compounds – so an additional $100 billion per year is $1 trillion over the next decade.”

Others chime in

Others have also warned of the adverse economic effects of the US-Israeli war on Iran.

Ben May, Bridget Payne and Paul Moroz of Oxford Economics recently published a report warning that a longer war in Iran“could tip the global economy into recession.”

In such a situation,“the Gulf states suffer most acutely – GDP down over 8% in 2026 – before rebounding sharply as production recovers,” they wrote.“Advanced Asian economies, which are especially reliant on Gulf oil, take a heavy blow from energy import cost surges and supply chain disruption.”

“Europe faces a painful squeeze on gas and electricity,” the trio added.“The US fares somewhat better given its domestic energy production, but an equity market decline of nearly 20% weighs heavily on consumer spending.”

Some US-based organizations have focused on the war's domestic economic impacts.

Dean Baker, a senior fellow at the Center for Economic Policy Research, published an analysis earlier this month asserting that“making enemies makes us poorer.”